What Apple’s App Price Increase Means For Subscription Users

This past week Apple raised the price of all it’s apps in the Canadian App Store by 17% as a result of the declining dollar. Recently the Loonie closed below 70 cents for the first time in 13 years. But what is the reasoning behind this decision from the mega brand, and more importantly, what does it mean for users who agreed to a subscription based app?

Subscription Based App

A subscription based app is one of a few pricing models you can choose from when buying (or developing) an app. It basically means the user agrees to pay a fee for a specific time frame the service chooses. For newspapers and magazines this could be monthly or seasonally, and the subscription is most often auto-renewed.

Paid Apps

Paid apps are simply that – the user pays outright to purchase the app from the get-go.

Free/Freemium Apps

Free or Freemium apps make money with in-app advertising. They can lock certain aspects of the app unless the user pays to upgrade, or have the user pay to upgrade to an advertisement-free version. Freemium apps also can be free for only a specific time, and then ask the user to pay if they want to continue on using the app once the trial has ended.

In-App Purchases

In-app purchases has become a very popular pricing model (we’ve all heard the stories of kids getting a hold of their parent’s candy crush or flappy birds game, and unknowingly racking up the bill buying lives).

Subscription Users Screwed?

While I’m sure no one in Canada is too happy about Apple’s increase in pricing, the worst hit are going to be those that use subscription based apps. Apple addressed the subscription issue in a memo sent out to developers saying:<!–more–>

“Subscriptions will not be interrupted in Canada, New Zealand, Mexico and Singapore. Shortly before their existing subscription renews, subscribers in these territories will receive an email from us to let them know about the price increase with the option to turn off their subscription.”

- Leaked Apple memo sent to developers

Problem #1 – Do you ever read the emails Apple sends you? If you are like most people, when Apple sends anything, even updated terms, you blindly click ‘Agree’ and get on with the rest of your day. If you subscribed to your favourite monthly newspaper at one price, it’s going to be a pretty big shock to see that agreed upon charge go up by 17% on your next bill.

Problem #2 – Often subscription based apps require a lot of time invested on the user’s part. For example, the Ancestry.com app now charges either $14.99 or $29.99 a month depending on the subscription package chosen by the user. If you had opted in to this service, and invested time into inputting and gathering data about your family tree, would you really decline the rate increase? Likely not, as your time invested is worth more than the 17%.

Not Just Apps Raising Prices

It’s not just the App Store that announced a price increase in the past few days – Canada’s big 3 mobile carriers have also released new pricing guidelines. Telus will raise the price of new contracts and any renewals by $5, Bell is also increasing new customer plans by $5, and Rogers has upped rates on various plans across the board.

What About Google Play?

At the time of this publication there was no world if Google Play would follow Apple’s lead and raise app prices. If they don’t, it will certainly appeal to their client base, who access phones for a fraction of the cost of an iPhone.

Why Now?

It’s not only Canada that is affected by the price increase. Israel, Mexico, New Zealand, Russia, Singapore and South Africa are also getting rate hikes. Customers who purchased subscription based apps in Russia and Africa will be forced to resubscribe at the new price. This might be a better option at making customers aware of the rate change, but it’s yet to be seen how subscriptions will be affected.

The Canadian dollar has been steadily dropping, and hitting that -30cent point this past month was a clear sign things aren’t going to get any better any time soon. On top of this, the price of oil has dipped below $30/barrel for the first time since Jean Chretien was Prime Minister.

We would all be living in la-la land to think that Apple investors were going to just eat the cost resulting from all of these countries declining currencies.